The central bank is to start implementation of the Basel II in mid-2017 as it seeks to enhance risk management and financial stability in the banking sector, after successful implementation of the Basel I, Governor of the Central Bank Dr. Kofi Wampah has said.
The Basel I Capital Accord aimed at assessing capital in relation to credit risk, or the risk that a loss will occur if a party does not fulfil its obligations.
Basel II largely aims at strengthening the solid foundation of prudent capital regulation, supervision and market discipline, and to enhance further risk management and financial stability.
“We are moving to implement Basel II/III from mid-2017, and will be engaging all banks in the process in the course of 2016,” Dr. Wampah said at the official re-branding of First Capital Plus Bank to Capital Bank last week.
“We are also in touch with Parliament to pass two crucial bills: the Banks and Deposit Taking Institutions bill and the Deposit Protection bill to enhance the framework for conducting banking business in Ghana,” he said.
A PwC survey noted that: “The expected implementation of Basel II will allow the regulator to better understand and evaluate the risk profile of each bank”.
Implementation of Basel One has led to a significant strengthening of the banking sector, with the minimum capital requirement now pegged at GH¢120million for the 29 universal banks in the country.
Basel II and III implementation in 2017 is expected to further enhance risk management in an industry that is presently recording high bad loans.
Reports last month indicated that, Commercial banks in the country have begun to cut loans and advances to businesses and consumers, in what is seen as a pre-emptive measure to contain losses as the quantum of Non-Performing Loans (NPL) increases.
According to the latest Bank of Ghana macroeconomic and financial data report, banks in the country have within a month cut credit to customers from GH¢29.1billion in August to GH¢28.7billion at the end of September.
The reduction, albeit marginal, has coincided with a sudden rise in non-performing loans from 13 percent in August to 13.5 percent in September — the first time in more than 12 months that bad loans on the books of banks have seen such a quantum leap.
The cut in loan advances is thus considered as a further tightening of credit to customers, since a difficult business operating environment has caused many businesses and consumers to default on their loans.
Board Chairman of Capital Bank, Mensa Otabil, said the change of name for the indigenous bank from First Capital Plus to Capital Bank is to reflect the new African, and the bank’s focus is to be the bank of choice on the continent in coming years.
Rev. Fritzgerald Odonkor, Chief Executive Officer of Capital Bank, said the bank aims to be a Tier-one bank within five years. “The vision at this stage is to become the bank of excellence. We want to become a Tier-one bank in the next five years and expand into other African markets. With this, there was the need for a new brand that is distinct and has an easy name,” he said.
Rev. Odonkor said: “We will focus not only on SMEs but to be strong in the retail sector in the country. We will form strategic partnerships to deliver value to the new sophisticated African.”
Rev. Odonkor, said as the bank enters another phase of its strategic growth, they have injected additional capital of US$50million into its operations to enhance responsiveness, give critical attention to key needs of the retail segment of the market, enhance human capital, deploy digital banking solutions, and improve efficiency across all facets of the value-delivery process.
He added that: “Our vision at this stage of growth trajectory is to become the local bank of excellence for African markets, providing the standard of measure for stakeholder-return with the strategic goal of becoming a Tier-1 bank in 5 years, and expanding our frontiers across the African market.”
He said that the bank is currently working on making its Speed banking vouchers available in over 180 new outlets nationwide to make it more accessible even in the most remote parts of the country, adding that more of such applications which are core in the banking industry will also be deployed to maximise efficiency in their operations as well as “simplify the banking process.”